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SEC Taking Aim at NFTs

As the Biden administration focuses on enhancing rules around cryptocurrencies to strengthen the impact of the Russian sanctions, the SEC looks to be taking efforts to in part regulate one of the fastest-growing markets globally – NFTs. Sales of NFTs grew from an estimated $95 million in 2020, to $25 billion in 2021. While this market is completely unregulated and characterized by high instances of fraud, that’s not the SEC’s focus. Rather, the question they’re grappling with is whether the sale of ‘fractional’ NFTs (i.e., the breaking down of an NFT into sub-parts that can be bought and sold) is in fact an offer and sale of securities. Given the prior rulemaking on the topic, it wouldn’t be surprising for the SEC to conclude that, yes, the sale of fractional NFTs is an offering of securities. Stay tuned. And for more background on this topic, check out this article from Bloomberg. More to come!

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